The foreign income tax must be correctly imposed under the relevant foreign law and in accordance with any tax treaty the country has with Australia. For example, if country A is limited under a tax treaty to taxing interest derived in that country by an Australian resident to 10% but imposes a domestic tax rate of 25% for interest derived by all foreign residents, only 10% of the tax counts towards the tax offset. The taxpayer would need to seek a refund of the balance (that is, 15%) from country A's tax authority.

The foreign income tax may be imposed at a supra-national, national, state/provincial or local/municipal level. An example of a supra-national tax is that imposed by the European Union on pensions paid to its former employees.

Foreign taxes not included

The following types of foreign tax do not count towards a foreign income tax offset:

inheritance taxes

annual wealth taxes

net worth taxes

taxes based on production

credit absorption taxes - that is, a tax that is payable only because the taxpayer or another entity is entitled to foreign income tax offset in Australia

unitary taxes - that is, a tax on income, profits or gains of a company derived from sources within the country where the tax is imposed that takes into account income, losses, outgoings or assets of the company (or of an associated company) derived, incurred or situated outside that country, except where the tax only takes those factors into account:

if such an associated company is a resident of the foreign country for the purposes of the law of the foreign country, or

for the purposes of granting any form of relief in relation to tax imposed on dividends received by one company from another company.

Penalties, fines and interest do not qualify as foreign income tax.

If you are unsure about whether a specific foreign tax is a foreign income tax, you can write to us and request a private binding ruling.

Taxes imposed by Australia's major trading partners for which a foreign income tax offset is available

A foreign income tax offset may be available for the foreign taxes listed below. This list is not exhaustive nor, except for India, does it include local or state taxes.

Argentina

Income tax (Impuesto a las ganancias)

Canada

Income taxes imposed by the Government of Canada under the Income Tax Act.

China

Income tax

France

Income tax and corporation tax, including any related withholding tax, prepayment (precompte) or advance payment.

Our commitment to you

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations.

If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take.

Some of the information on this website applies to a specific financial year. This is clearly marked. Make sure you have the information for the right year before making decisions based on that information.

If you feel that our information does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice.